TESTIMONY OF D. REID WILSON

TESTIMONY OF
D. REID WILSON
CHIEF OF STAFF
U.S. ENVIRONMENTAL PROTECTION AGENCY
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT
OF THE
COMMITTEE ON WAYS AND MEANS
U.S. HOUSE OF REPRESENTATIVES

September 30, 1999

Good afternoon Mr. Chairman and members of the Committee. I am
Reid Wilson, Chief of Staff at the United States Environmental
Protection Agency (EPA). I am pleased to provide comment about
Clinton Administration efforts to use tax incentives to preserve
open space, spur economic redevelopment through brownfields cleanup,
and promote more livable communities throughout America.

Across America, communities are searching for ways to boost economic
growth, protect their environment and public health, and preserve
a high quality of life. They want to see older neighborhoods revitalized.
They want to see their local waters protected. And they want to
preserve farmland and green space close to home.

In 1998, according to the Brookings Institute and State Resources
Strategies, more than 240 ballot initiatives to preserve open
space, protect water quality, and speed brownfields cleanup were
considered in communities across the country. More than 150 passed,
authorizing $7.5 billion in state and local spending. These communities
were responding, in part, to the astonishing loss of open space
that has occurred across the nation. According to the American
Farmland Trust, more than 30 million acres of farmland have been
lost since 1970. That's like paving over all of Pennsylvania.
This loss of land has substantial environmental consequences.
For instance, a one acre parking lot generates sixteen times more
runoff than a meadow. This runoff washes toxic chemicals and other
pollutants into our waters, lakes and coastal areas, making them
unfit for families who want to enjoy them and wildlife that depend
on them.

This Administration has proposed creative ways to help communities
further their efforts to promote more livable communities. I would
like to focus on two of these proposals - the Better America Bonds
program and extension of the Brownfields Tax Incentive. A key
principle to both of these proposals is that the federal government's
appropriate role is to provide tools, resources and information
to communities so that they can grow in ways that are best for
them, not to interject the federal government into local land
use decisions. These proposals are about empowering and assisting
communities, not dictating or micromanaging their decisions.

BETTER AMERICA BONDS

The Better America Bonds program, as embodied in H.R. 2446, would
provide states, tribes, counties, and cities $9.5 billion in bonding
authority over five years to preserve their open spaces, protect
their water, clean up brownfields, and improve their quality of
life, in a manner that works best for them.

Better America Bonds can be used for three general purposes.
First, State, Tribal and local governments can create or restore
parks and greenways, preserve green spaces, and protect threatened
farmland and wetlands, either by acquiring title or purchasing
conservation easements.

Second, Better America Bonds can be used to fund brownfields
site assessments, site cleanups, and provide flexible funding
to boost reuse of these contaminated properties. The U.S. Conference
of Mayors has pointed to a lack of capital for local governments
as the leading barrier to the cleanup and reuse of brownfields.
Better America Bonds will supplement existing brownfields grant
and loan funding with bond proceeds. This spares green space from
development by reusing already developed properties at a time
when over 700 acres of open space and farmland are lost per day
to development.

Third, Better America Bonds can be used to protect and improve
water quality. Rivers, lakes, coastal waters, and wetlands can
be restored or protected, stream side corridors can be planted
or repaired, and land can be acquired to reduce polluted runoff
or protect drinking water sources.

Better America Bonds are structured to provide a deeper subsidy
to communities than traditional tax-exempt bonds. In short, they
are a great bargain for state and local governments. The bonds
are interest-free to communities because the bondholder receives
tax credits from the federal government in lieu of the interest
they would have received from the community. The Treasury Department
and EPA estimate that a community that issues a one million dollar,
15-year, tax exempt bond (at an interest rate of 5.8 percent)
would pay roughly $102,000 per year to service the debt. But a
community issuing a tax credit bond would pay only $42,000 per
year into a sinking fund earning interest at the current Treasury
rate of about 6.2 percent. That is an annual savings of $60,000
-- or about 60%. Over the fifteen year life of the bond, the savings
add up to $900,000.

Bonding authority will be distributed directly to States, Tribes,
and local communities through a competitive process. EPA plans
to administer the Better America Bonds program in consultation
with other federal agencies including the USDA, Transportation,
and Interior. EPA envisions that the program will be run the same
way as our successful Brownfields grants program, which has provided
over $60 million to three hundred communities to assess contamination
of brownfields sites and plan cleanup activities. This program
has leveraged over $1.5 billion in redevelopment funds and supports
more than 4,000 jobs. All of this has been accomplished without
writing a single rule or regulation.

The brownfields program is popular and easy for communities to
use. At the outset, EPA conducted an extensive stakeholder outreach
effort to help us shape the application criteria that communities
use to apply for grants. As with the Brownfields program, EPA
will embark upon a thorough outreach process to receive advice
and input from federal agencies and communities to help create
the application criteria for Better America Bonds (assuming the
program is passed by Congress and signed into law). In fact, this
summer, EPA held Better America Bonds listening sessions around
the country to solicit advice from a diverse group of stakeholders.
We will work closely with communities to ensure that the program
is structured in a way that meets their needs. We want to preserve
green space, not promote red tape. And, like the Brownfields program,
once the criteria are written and applications are received, we
will put together a panel of federal agencies with relevant expertise
to help review and evaluate applications.

One thing we would like to encourage through Better America Bonds
is regional partnerships. For instance, a city and several neighboring
suburban counties could submit a joint application to clean up
brownfields sites in the city, purchase open space outside the
city, and protect drinking water by restoring wetlands along a
shared stream. We also want to make sure the program is available
to all types of communities - big and small, suburban, rural,
and urban.

It is important to emphasize what this program is not. The federal
government will not purchase one square inch of land; the purpose
of the program is to provide resources to communities so that
they can implement decisions they believe are in their best interests.
Nor will the federal government get involved in local zoning decisions.
EPA will not micromanage decisions included in communities' applications
for bonding authority. Just as in our Brownfields program we do
not tell communities which brownfields sites to assess, we will
not suggest which parcels of land to purchase under Better America
Bonds. It is up to the community to put together a plan that is
best suited to its needs, whether it is brownfields cleanup, water
quality protection, open space preservation, or some combination.
Finally, this program is not mandatory; it is up to communities
to choose whether they want to participate.

BROWNFIELDS TAX INCENTIVE

EPA and other Federal agencies are providing resources and tools
to state and local governments to clean up and redevelop brownfields
-- abandoned, potentially contaminated properties. As mentioned
before, EPA's pilot grant program has been extremely successful.
In addition, EPA's Brownfields Cleanup Revolving Loan Fund provides
funding for communities to move beyond site assessment and on
to cleanup. So far, 68 communities are eligible for up to $500,000
each for cleanup activities. Finally, EPA's Job Training and Development
Demonstration Pilot Program has helped create jobs by training
workers to perform site cleanups in 21 communities so far.

We would like to commend this Committee and Congress for the
passage of the Brownfields Tax Incentive in the last Congress.
Passage of the Brownfields Tax Incentive has enabled the federal
government to help level the economic playing field between brownfields
and previously unused greenfield sites. Under the tax incentive,
environmental cleanup costs for properties in designated areas
are fully deductible in the year in which they are incurred, rather
than being capitalized into the basis of the property. The incentive
can reduce the capital cost of these types of investments by more
than half. We regard this tax provision as an essential element
of a comprehensive brownfields program and hope it can be made
a continuing and broad tool for brownfields redevelopment in the
future. The Treasury Department estimates that the $.3 billion
incentive will leverage $3.4 billion in private investments and
return some 8,000 brownfields to productive use.

West Chester, Pennsylvania provides a good example of how the
tax incentive can be used to great advantage. The tax incentive
was used there to help a demolition and environmental service
company relocate its headquarters onto a brownfields property.
The site was in a part of town plagued by a 29.6 percent poverty
rate, well above the 20 percent poverty threshold set in Section
198. The company estimates that 100-200 jobs could be created
and that the tax incentive saved nearly $42,000 in project costs.

Similarly, a company in Portland, Oregon plans the redevelopment
of a brownfields located in an Enterprise Community along Portland's
waterfront. The waterfront location and large property size made
the area perfect for marine-related activities. The federal tax
incentive was a key element in the efforts to revitalize a site
that laid dormant and derelict within Portland's urban core. If
the site is developed as planned, the company estimates that it
will generate more than 150 jobs, some of which may be filled
by residents in the adjacent community.

Despite these successes, many stakeholders voiced a concern that
the geographic requirements are too restrictive. EPA, in response,
has developed an internet-based mapping program which will allow
taxpayers to determine the eligibility of their properties for
Section 198 election. This mapping system has shown us that large
and widespread tracts of our inner cities and rural economic corridors
are eligible under one or more of the criteria.

Permanent extension of the Brownfields Tax Incentive is critical
so that more communities can include it in their set of tools
to bring brownfields sites back to vital economic life.

Conclusion

The Administration is working hard to develop new ideas and approaches
that respond to public concern that we find creative ways to help
communities grow according to their own values, maintain their
quality of life, and enhance economic competitiveness. This is
a challenging task, but innovative tax proposals such as Better
America Bonds and extension of the Brownfields Tax Incentive will
provide communities with resources they need to protect parks
and open spaces, enhance water quality, and return contaminated
properties to productive economic use. These programs allow communities
to set their own priorities and design for themselves their preferred
path toward economic revitalization and environmental protection.
We look forward to working with the Committee to define common
sense approaches to meet the new challenges that we face today.